What’s an RMD?
An RMD, or Required Minimum Distribution, is the minimum amount the IRS requires you to withdraw each year from certain tax-deferred retirement accounts once you reach the applicable age. Because that money generally received tax-deferred treatment while it was invested, RMDs eventually bring some of those dollars into taxable income.
What is an RMD?
Here's one that catches good savers off guard: for decades, you've been putting money in your retirement accounts.
But at a certain age, Uncle Sam says — "Time's up. Start taking it out."
That's an RMD.
Let's break it down.
RMD stands for Required Minimum Distribution.
Think back to the D.A.D. framework — Deposit, Accumulation, Distribution.
With a Traditional IRA or a 401(k), you got a tax break going in, and your money grew tax-deferred for years.
But the IRS was always going to collect eventually.
The RMD is them saying: at a certain age, you must start withdrawing a minimum amount each year — so it can finally be taxed.
For most people right now, that age is 73.
But it's scheduled to rise to 75 starting in 2033 — so depending on your birth year, your number could be 73 or 75.
We'll put both up on screen.
How is an RMD calculated?
How much?
It's based on your account balance and a life-expectancy figure from an IRS table — and the older you get, the bigger the required slice.
The key thing: it's a minimum, not a maximum.
You can always take more.
And it applies to tax-deferred retirement accounts such as Traditional IRAs and many employer retirement plans.
A Roth IRA? No required distributions during your lifetime — one of its quiet superpowers.
Miss an RMD, though, and there can be a significant tax penalty — so this is not one to forget.
Why the first RMD deadline can create a tax problem
Here's the piece that trips people up.
Your first RMD has a special deadline — you can delay it to April 1st of the year after you reach your applicable RMD age.
Sounds like a gift, right?
But if you do, you'll take two RMDs in that second year — your delayed first one and the current one.
Two taxable withdrawals, stacked into a single tax year, can bump you into a higher bracket.
So that "extension" can quietly cost you.
How can you plan for RMDs?
The good news: with a little planning, RMDs are very manageable.
Some people start taking withdrawals before RMD age to smooth out the tax hit.
Others use a Qualified Charitable Distribution — giving eligible IRA dollars directly to charity — which can also count toward an RMD without being included in taxable income when the requirements are met.
There are real strategies here — but the right move depends entirely on your bigger picture.
What does an RMD mean for your retirement plan?
Bottom line: an RMD is simply the tax bill you deferred, finally coming due.
Knowing it's coming — and planning around it — is what turns a surprise into a strategy.
If you're in your sixties, this is exactly the kind of thing worth mapping out before it hits.
Got a retirement question? Drop it in the comments — that's what Ask Jose is for.
Have questions about how RMDs could affect your retirement income and taxes? Schedule a complimentary consultation.
Important Disclosure Advisory services are offered through LifeCraft Wealth Management, an Investment Advisor in the State of FL. All content is for informational purposes only. It is not intended to provide tax or legal advice or to serve as the basis for any financial decisions. Nor is it intended to project current or future performance or indicate future results. Purchases are subject to suitability, which requires a review of an investor’s objectives, risk tolerance, and time horizons. Investing always involves risk and the possibility of loss of capital.
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